India’s forex reserves fall by $3.05 bn to $699.74 bn; Gold reserves rise by $342 mn

MUMBAI: India’s foreign exchange reserves (forex) witnessed a slip of $3.049 billion to $699.736 billion for the week ending July 4 amid the uncertain global trade environment, official data released by the Reserve Bank of India showed.

In the preceding week, the country’s forex reserves registered an uptick of $4.8 billion to $702.78 billion. In the week ending July 4, according to the RBI data, the major component of the forex reserves, the foreign currency assets, slipped $3.537 billion to $591.287 billion.

Contrary to the dip in the previous week, the gold reserves witnessed an uptick of $342 million to $84.846 billion in the week ending July 4, data suggests. A significant constituent of the forex, the Special Drawing Rights (SDRs) witnessed an uptick of $39 million, while the reserve position in the International Monetary Fund (IMF) was up by $107 million to $4.735 billion, the data of the central bank suggests.

Central banks worldwide are increasingly accumulating safe haven gold in their foreign exchange reserves kitty, and India is no exception. The share of gold maintained by the Reserve Bank of India (RBI) in its foreign exchange reserves has almost doubled since 2021, till recently.

In 2023, India added around $58 billion to its foreign exchange reserves, contrasting with a cumulative decline of $71 billion in 2022. In 2024, the reserves rose by a little over $20 billion, touching an all-time high of $704.885 billion at the end of September 2024.

India’s foreign exchange reserves (forex) are sufficient to meet 11 months of the country’s imports and about 96 per cent of external debt, said Governor Sanjay Malhotra while announcing the outcome of the Monetary Policy Committee (MPC) decisions. The RBI governor expressed confidence, stating that India’s external sector is resilient and key external sector vulnerability indicators are improving.

Foreign exchange reserves, or FX reserves, are assets held by a nation’s central bank or monetary authority, primarily in reserve currencies such as the US Dollar, with smaller portions in the Euro, Japanese Yen, and Pound Sterling. The RBI often intervenes by managing liquidity, including selling dollars, to prevent steep Rupee depreciation. The RBI strategically buys dollars when the Rupee is strong and sells when it weakens. (ANI)